A Florida Appeals Court Reverses a Decision in Favor of Homeowners’ Insurer, Finding Issues of Fact About Whether Earth Movement, an Excluded Peril, Played a Part in a Home’s Damage 

November, 2007 -

In Castillo v. State Farm Florida Insurance Co., No. 3D06-2874 (Fla. Dist. Ct. App. Oct. 17, 2007), the Court of Appeal of Florida, Third District, reversed a decision granting summary judgment in favor of an insurer, finding issues of fact about whether earth movement, an excluded peril under a homeowners’ insurance policy, played a part in a dwelling’s damage from nearby blasting.

Case Background
The insureds sued the insurers for breach of contract arising out of the denial of an insurance claim made under a homeowners’ insurance policy. The homeowners alleged that “nearby blasting created shockwaves and vibrations which damaged the insured dwelling without displacement or permanent displacement of the earth.” The insurers filed a motion for summary judgment, contending that damages caused by vibrations and shockwaves passing through the earth were excluded by an “earth movement” exclusion in the homeowners’ policy, which contained a lead-in provision stating that “[w]e do not insure for such loss regardless of … the cause of the excluded event.”

The trial court in Miami-Dade County found that coverage was precluded under this exclusion.

The Appellate Court’s Decision
Reversing the trial court, the appeals court held that the policy did not specifically address whether or not damages caused by blasting, shockwaves or vibrations categorically fell under “earth movement” and would, therefore, be excluded from coverage. Due to this ambiguity in the contract, the appellate court looked to parol evidence for clarification of the policy, and found that the insurers’ own guidelines envisioned a possible scenario where shockwaves and vibrations caused by blasting might result in damage to an insured dwelling without displacement of the earth. Moreover, not only did such an event appear to be conceivable, but the insurers’ guidelines acknowledged that such a loss would be covered.

The insureds specifically alleged that the damages occurred without displacement of the earth. In moving for summary judgment, it was the insurers’ burden to demonstrate that no genuine issue of fact existed. The appellate court found that whether or not the shockwaves and vibrations alleged by the homeowners damaged their dwelling without displacement of the earth was a question of material fact. Because the insurers presented no evidence conclusively foreclosing the possibility that the dwelling was damaged without earth displacement, an issue of material fact existed, and summary judgment was improper. 

Furthermore, the appellate court explained that when an insurer relies on an exclusion to deny coverage, “it has the burden of demonstrating that the allegations of the complaint are cast solely and entirely within the policy exclusion and are subject to no other reasonable interpretation.” The appellate court found that the insurer also failed to meet its burden of demonstrating that the loss resulted from a cause excepted from coverage. Accordingly, the entry of summary judgment in favor of the insurer was reversed.

The appeals court distinguished its holding from the unrelated case of State Farm Fire & Casualty Co. v. Castillo, 829 So. 2d 242 (Fla. Dist. Ct. App.) decided in 2002, in which the court had found that a similar “earth movement” exclusionary clause and lead-in provision precluded coverage for any loss resulting from earth movement regardless of the cause of the earth movement. In the 2002 case, the issue presented was whether the earth movement exclusion applied to both natural and man-made occurrences. Here, by contrast, the principal issue on appeal was whether an issue of fact existed about whether earth movement played a part in the home’s damage from the nearby blasting.

Under Florida law, in cases involving homeowners’ insurance policies with “earth movement” exclusionary clauses and allegations of damage caused by shockwaves or vibrations without displacement of the earth, an insurer must be prepared to present evidence foreclosing the possibility that the damage was caused without earth displacement. Additionally, this case demonstrates how Florida courts approach an insurer’s burden at the summary judgment stage, i.e., an insurer moving for summary judgment must affirmatively demonstrate that there is no issue of material fact and, if relying on an exclusion to deny coverage, the insurer has the burden of demonstrating that the loss resulted from a cause excepted from coverage.

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